Gluts and Shortages Steer Metals to Biggest Split in 2 Yearsby
‘It’s not a uniform view across the metals space:’ SocGen
Zinc is up 40% this year compared with just 1.8% for copper
Metals markets for the past few years have been famous for one thing: big losses. Now that’s starting to change.
After moving in lockstep with Chinese demand -- soaring in the boom years and plunging as growth leveled off -- metals prices are now going separate ways and it comes down to supply issues. Zinc, nickel and tin have rallied on shortages, while excess supply limits copper, lead and aluminum.
That’s created the biggest divergence between metal prices since 2014, according to a study by Xiao Fu, the head of commodity strategy at BOCI Global Commodities (U.K.) Ltd., that examined correlations between different metals.
“It’s not a uniform view across the metals space,” Robin Bhar, an analyst at Societe Generale SA in London, said by phone. “I see some encouraging signs for the commodity space, but you’ve still got to be careful.”
In 2015, China’s slowing economy was the catalyst for metals markets as concern over weakening commodities demand caused prices to collapse. The move was largely uniform: four of the six metals traded in London fell about 20 percent.
Now China’s sluggish growth has largely been priced in, so changes in supply are having greater effect and causing different moves across metals. For example, zinc is up 40 percent in 2016, nickel 17 percent and copper 1.8 percent.
Here’s a chart of the six metals traded in London and how they’ve performed:
|Zinc||+40%||Producers including Glencore Plc curtailed output this year, leading to forecasts for shortages.|
|Tin||+25%||Indonesia, the world’s biggest tin exporter, imposed restrictions on production and overseas sales.|
|Nickel||+17%||Philippines, the top nickel-ore supplier, is closing mines that don’t meet international standards. It has already shut down about 2 percent of world supply.|
|Aluminum||+12%||Prices have rebounded along with the broader recovery in commodities. That’s led some smelters in China, which supply more than half of the world’s aluminum, to restart some idled plants.|
|Lead||+4.2%||Used car batteries in China are being recycled for lead, bringing more metal back to the market. Demand for electric bicycles is also slowing.|
|Copper||+1.8%||Mine supply is picking up and the trend is expected to continue in the coming quarters, Goldman Sachs Group Inc. said.|